Thursday 25 March 2010 16.42 EDT
First published on Thursday 25 March 2010 16.42 EDT

One of Canada's largest pension funds has snapped up Camelot, the operator of the National Lottery, beating a rival offer from private equity firm CVC Capital Partners that involved former Olympic rower Sir Matthew Pinsent.

Ontario Teachers' Pension Plan (OTPP) is buying Camelot for just under £400m after a sales process that lasted almost a year. Camelot last year began its third lottery licence, which runs for a decade with an option to extend for five more years.

The news will yet again raise questions about the acquisition of British assets by foreign firms, not least because the National Lottery is committed to raising £750m towards the cost of staging the London 2012 Olympic and Paralympic games. The deal needs to be cleared by the National Lottery Commission.

Dianne Thompson, chief executive of Camelot, said: "We welcome Teachers' commitment to the National Lottery's ongoing success, and look forward to the opportunity of working with them."

OTPP is the largest occupational retirement scheme in Canada and one of the country's largest institutional investors, reporting assets of $87.4bn (£57.3bn) in 2008. Its assets are expected to have topped $100bn last year.

It is already an avid acquirer of British assets. In 2007, OTPP teamed up with Australia's Victorian Funds Management Corp to spend £420m buying a 48% stake in Birmingham airport from Australian investment bank Macquarie, and last December spent £128m increasing its stake in Bristol airport, the country's ninth-busiest airport, by 35.5% to 49%.

It also owns Acorn Care and Education, a provider of 10 special needs schools and independent fostering services across the UK and was last month at the centre of intense speculation about a possible bid for Northumbrian Water. OTPP has owned a quarter stake in the company for the past five years, but stressed last month that it was not looking to make an all-out bid.

Camelot was created almost 20 years ago to bid for the licence to run the UK's national lottery, seeing off a rival consortium fronted by Sir Richard Branson. The fight over that first licence quickly dissolved into a spat over dirty tricks which ended with the entrepreneur winning libel damages from the head of one of Camelot's shareholders, GTech.

Last April, four of Camelot's remaining five shareholders – Cadbury, banknote printer De La Rue, IT firm Fujitsu and aerospace group Thales – decided to put their stakes in the business up for sale. They were joined just before Christmas by the last of Camelot's shareholders, Royal Mail. The sale process, run by Greenhill and Rothschild, was then held up by the departure of Royal Mail chief executive Adam Crozier.

This week, reports in the French press said that Française des Jeux had decided not to get involved in the last round of bidding for Camelot, leaving it a two-horse race between OTPP and private equity firm CVC. The board of Camelot met today to make their decision.

Sources close to CVC admitted that the private equity firm had failed in its bid for the firm. OTPP, Camelot and its advisers were unavailable for comment.

The CVC bid would have seen Pinsent join the board of Camelot as a non-executive director beside new chairman Sir John Sunderland, the former boss of Cadbury.

Both bidders are understood to have made it plain that they support Camelot's intention of expanding overseas as well as into new business areas in the UK. The company is waiting for the National Lottery Commission to decide whether it can bid for commercial non-lottery services, such as mobile top-up services alongside lottery tickets in convenience stores.